Many people who are interested in investing in commodities, currencies, indexes, or equities use futures trading as a means to bet on the future prices of the assets. Traders engage in this practice when they acquire or sell standardized contracts that bind them to future purchases or deliveries of assets at fixed prices and on specified dates.
As mentioned above, futures trading is the practice of trading assets like commodities, currencies, or stock indices at a fixed price on an unknown future date through the purchase and sale of standardized contracts. These contracts allow people protect themselves from price fluctuations or make profits by predicting them. Futures use leverage, which means you can handle large amounts with less money up front. This makes both gains and losses bigger.
A futures contract is a legal agreement that specifies the quantity of an asset, what its value is, when and where it will be delivered, and how much it will cost. The price negotiation can be done in person or online. Traders can “go long” (buy, when expecting prices to go up) or “go short” (sell, when they expect prices to go down).
Profits or losses are resolved daily according to the closing price, and accounts are credited or debited appropriately, as positions are marked-to-market. Contracts expire every three or six months, and most traders close their positions before they expire to avoid having to have the goods delivered physically. Instead, they typically choose cash settlement.
The following are some of the practical steps you’ll need to set up:
Futures trading has both opportunities for profit and obstacles to overcome. To be successful, you need to know how to analyze contracts, use leverage wisely, and stick to your plans. Before trading with real money, beginners should open demo accounts, learn how the market works, and keep improving their strategy. Futures can be a great way to make money and safeguard your portfolio if you are patient and know how to manage risk.
Futures trading is the buying and selling of standardized contracts to exchange assets at a set price at a later date, using leverage to hedge or speculate.
When trading futures, beware that leverage amplifies losses and emotional decisions can lead to significant financial risks, including losses exceeding your initial deposit.
The primary risk management tool is a stop-loss order, which automatically exits a losing trade at a predetermined price.
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This post was last modified on Oct 10, 2025, 08:05 BST 08:05